Insight Article Desktop Banner
 
 
Market Insights
  •  
January 14, 2022

2022 Global Real Estate Outlook Late-Cycle Investing Philosophy Comes Early

Insight Video Mobile Banner
 
January 14, 2022

2022 Global Real Estate Outlook Late-Cycle Investing Philosophy Comes Early


Market Insights

2022 Global Real Estate Outlook Late-Cycle Investing Philosophy Comes Early

Share Icon

January 14, 2022

 
 

2021 marked the most rapid economic recovery witnessed in the U.S. over the past four decades. As a result, inflation has reached its highest point since the 1970s and markets are polarized between the need to raise rates to curb price growth versus continuing to stimulate the economy to achieve and sustain full employment. In the meantime, real estate fundamentals have accelerated beyond expectation, with 20% rent growth common in many U.S. apartment and industrial markets and cap rates at record low levels. Consequently, returns in 2021 are likely to be at the highest point since 2010. While Europe’s recovery has lagged and Asia’s has been more stop-start, real estate fundamentals have exhibited strength, and the weight of capital looking for durable income has kept yields low.

 
 

Within 18 months, the global economy has already reached the mid-phase of a typical economic cycle. From here, MS Research forecasts a moderation in economic growth and tighter monetary policy, with significant variation around the world, linked to COVID variants and vaccination progress, government policy, divergent growth drivers and geopolitical risks. Real estate fundamentals will follow suit, with moderating but above-trend near-term rent growth and the likelihood of flat to marginally higher cap rates in some markets and sectors as growth expectations moderate.

The structural impacts from COVID-19 will also continue to influence the amount and type of real estate sought by occupiers. While uncertainty and occupancy challenges were dominant themes in 2021, it is likely that more permanent impacts may emerge in terms of space usage, desired asset specifications and preferred locational attributes within each sector in 2022 and 2023.

GDP Growth Expected to Remain Strong, but Decelerating as Economy Shifts to Mid-Cycle Phase

Following a robust global growth rate of 6.1% in 2021, Morgan Stanley (MS) Research expects growth to step down to 4.7% in 2022. U.S. growth is expected to stay strong, at 4.6% in 2022, slightly down from 5.5% in 2021, supported by deferred consumption, inventory rebuilding and lack of fiscal drag. Growth in Europe and the U.K. is expected to remain robust and balanced and match the U.S. at 4.6% in 2022, supported by a solid labor market and accomodative policy. From 2023, U.S. growth is expected to outpace other developed markets, in-line with pre-COVID trends. In China, MS Research expects policy to reverse the recent sharp slowing, but still forecasts medium-term growth below pre-COVID rates. Japan is expected to continue its path toward economic normalization, generating above-trend growth of 2.9% in 2022. This growth is expected to be supported by an increase in Japan’s exports of capital goods, IT-related items and autos as well as a gradual return of personal spending from higher vaccination rates.

 
 
 
DISPLAY 1: Slower but Above Trend Growth Forecast
 

Source: MS Research, Strategy, data as of November 16, 2021

 
 

Labor Supply Constraints: Mostly a U.S. Concern

Labor market frictions are a key theme, with reported shortages most acute in the U.S. Despite strong labor demand and rising wages, labor force participation remains 170bps below its pre-COVID level. However, prime-age labor force participation rates are expected to increase by 40bps in 2022 and another 30bps in 2023, helped by improving child care, falling health risks and rising wages. In contrast, in the euro area the labor market has weathered the pandemic reasonably well, with the labor force participation at the end of 2Q just 0.7pp below its pre-COVID level due to successful furlough schemes. In the UK, the participation rate stands at 100bps below its 1Q20 highs, worse than in the euro area but better than the U.S.

Inflation is forecasted to stay high through 2022

Inflation prints have reached record levels in the U.S. and Europe prompting a shift in Fed policy. While inflation is forecast to stay high through most of 2022, it is expected to moderate thereafter. This forecasted moderation is due to a shift in consumer spending from goods to less inflationary services, easing supply chain bottlenecks and a retreat in energy prices.

In the U.S., the price effects of supply chain disruptions are expected to subside over the coming quarters, with continued higher rents and wages countering these deflationary factors, which is expected to keep overall inflation at higher levels than pre-COVID through 2023. Overall MS research forecasts 2022 inflation prints of 3% in the U.S., 2.3% in the U.K., 1.4% in Europe and 1.2% in Japan (4Q ‘22 over 4Q ‘21).

 
 
 
DISPLAY 2: Inflation Expected to Stay Elevated in 2022
 

Source: Morgan Stanley Research, data as of November 2021

 
 
 
DISPLAY 3: Transaction Activity Extending Beyond Industrial and
 

Source: Real Capital Analytics, MSREI Strategy, data as of September 2021

 
 

Tightening Central Bank Policy

In line with the midcycle economic environment and due to more persistent inflationary pressures, monetary policy is expected to normalize and tighten. The Federal Reserve has accelerated its tapering of asset purchases with the program expected to end by March 2022. Additionally, the Fed has projected three 25bps rate hikes in 2022, another three in 2023 and two more in 2024. The Bank of England and Bank of Canada are also poised to raise interest rates in the near term. The U.S. yield curve has begun to steepen, with long-term rates hitting 1.74% (as at January 6, 2022), and MS Research expects them to continue to rise and reach 2.1% in 4Q22, resulting in a flatter curve going into 2023, given higher policy rates.

The most prominent risk to Morgan Stanley’s overall constructive forecast (+40bps above consensus) are continued supply chain pressures (including both goods and labor) and the rise in number and severity of cases from the new omicron COVID variant.

The supply constraints that have held back growth and pushed up inflation in 2021 could easily persist or worsen. In such a scenario, growth would be notably weaker, inflation higher and policy rates aggressively tighter. Given relatively high and accelerating vaccination rates and a “live with COVID” stance adopted by most countries, the risk of new broad-based lockdowns and consequent significant loss of economic activity is expected to be relatively low.

 
 
 
DISPLAY 4: Short- and Long-Term Interest Rates
 

Source: Board of Governors of the Federal Reserve System, Morgan Stanley Research, data as of December 2021

 
 

Shrinking Real Estate Investable Universe Will Increase Competition for Core Assets

Given the low interest rate environment, the weight of capital targeting real estate will likely continue to increase as investors search for yield. While the industrial, residential and healthcare sectors are taking the lion’s share of allocated capital, core offices and niche sectors like student/senior living are beginning to garner more investor interest despite facing occupancy challenges in 2021. At the same time, there continues to be less investor appetite for retail, noncore office and business-related hotels.

 
 

Price Acceleration

Industrial and residential prices have accelerated rapidly, in part due to cap rate compression driven by outsized investor interest, but also due to significant rent growth, most notably in the U.S. Outside of London, Europe’s industrial price acceleration has been largely driven by cap rate compression. While rent growth has not kept pace, it is expected to catch up over the coming years. In Asia, prices and rents have grown more modestly, suggesting some potential upside to values.

On the other end of the spectrum is office, which has seen considerably less price growth and even more divergence across regions. For example office markets in Germany have still seen cap rate compression while gateway cities in the U.S. have seen yields expand, particularly for non-stabilized assets due to greater uncertainty over future demand given likely higher adoption of work-from-home models.

 
 
 
DISPLAY 5: Price Growth
 

Source: Green Street Advisors, PMA, MSREI Strategy, data as of October 2021

 
 

Fundamentals may converge across sectors but remain bifurcated across markets

Across all regions, property market fundamentals have been impacted by the pandemic to differing degrees. The industrial sector continues to exhibit the strongest performance globally, spurred by tenant demand driven by an acceleration in e-commerce and supply chain reconfiguration. Residential sector fundamentals have surged, given supply shortages, higher incomes and for-sale affordability challenges. While fundamentals in these two sectors have been propelled by structural changes from COVID-19, it is expected that fundamentals will moderate due to higher supply and a pullback in space demand from industrial tenants and lower multifamily demand, given rent affordability challenges.

While uncertainty and occupancy challenges plagued the office sector in 2021, higher utilization rates are expected in 2022. However, as employees’ work preferences shift from being health-driven to lifestyle-driven, it is expected that hybrid work models could become the norm, leading to a reduction in overall office demand of 10%-15% with significant variation across region, and asset location and specifications. Fundamentals have also begun to improve for sub types of retail and hotel assets, most notably Class A malls and leisure-oriented hotels.

 
 

Industrial

SIGNIFICANT ACCELERATION IN PRICING, DEVELOPMENT STRATEGY MOST ATTRACTIVE

Operating Fundamentals

  • The industrial sector continues to see more yield compression than other sectors, driven by outsized investor demand, given the strong growth outlook.
  • Higher e-commerce penetration, supply chain diversification and inventory restocking is expected to continue to support significant incremental demand for well-located logistics assets.
  • Inventory shortages resulting in supply chain reorientation is expected to continue to shift demand to new markets, e.g., Vietnam, India, Mexico.
  • Additionally, supply chain bottlenecks have led to shipping and port delays and shifted incremental demand to inland port and more rail- dependent locations.
  • Significant divergence in market rent growth globally, the U.S. and the UK leading the way.
  • Market is beginning to homogenize – similar cap rates across markets (both primary and secondary) despite different outlooks and exposure to supply risk.
 
 
 
DISPLAY 6: Historically Tight Vacancy in U.S. and Europe
 

Source: JLL, MSREI Strategy, as of October 2021

 
 
 
DISPLAY 7: Low Yields Reflect Continued High Rent Growth Expectations
 

Source: CBRE, BNP Paribas, JLL, MSREI Strategy, data as of October 2021.

 
 

Investment Strategies

  • U.S.: Leverage existing relationships and target development opportunities in primary U.S. markets, e.g., Los Angeles, Boston and high- growth second-tier markets supported by unique demand drivers.
  • Europe: Target development opportunities that are at an attractive basis in highest-growth markets in locations with favorable demand/ supply balance, e.g., London submarkets.
  • Asia: Target development opportunities for smaller-scale warehouses in infill locations within Japan. Continue to grow industrial platform in key distribution hubs in India and China.
 
 

Residential

SURGE IN FUNDAMENTALS IS EXPECTED TO MODERATE AS DEMAND/SUPPLY REBALANCE

Operating Fundamentals

  • Supply shortages continue to exist at more affordable price points in many global markets.
  • Significant market rent growth in the U.S. is challenging rent affordability and, therefore, sustainability of future rent growth.
  • Supply expected to catch up in many markets, returning housing markets to equilibrium.
  • Low cap rates reflect loss to lease in many markets (market rent above in-place rent).
  • Regulatory risk limiting rental growth in select markets where affordability is stretched.
 
 
 
DISPLAY 8: Low Yields Reflect High Loss to Lease Rates
 

Source: Census Bureau, Moody’s Analytics, MSREI Strategy, data as of October 2021

 
 
 
DISPLAY 9: Rent Growth Normalizing
 

Source: U.S. Census Bureau, Moody’s Analytics, MSREI Strategy, as of November 2021

 
 

Investment Strategies

  • U.S.: Reposition Class A-/B+ assets at more attractive basis and position for jobs and rent recovery in major residential markets and develop single-family rental product to address housing shortages in Sun Belt locations benefiting from shifting demographic trends.
  • Europe: Leverage asset management expertise to reposition/refurbish slightly older assets and drive rental growth in higher-growth markets, e.g., Finland.
  • Asia: Target development/forward purchase opportunities in Japan and continue to evaluate opportunities in emerging for-rent markets, e.g., Australia.
 
 

Office

SIGNIFICANT BIFURCATION IN PERFORMANCE

Operating Fundamentals

  • Impact of increased work from home on offices continues to be a major discussion item, with significant variation around the world due to health and lifestyle choices.
  • Overall, expect to see lower demand and wide dispersion in performance among markets and asset quality levels.
  • The performance is expected to widen between commodity product exposed to functional obsolescence and huge capex needs and modern, differentiated product in stronger markets.
  • Emerging “core” markets are taking an increasing share of absorption and investment activity.
 
 
 
DISPLAY 10: Regional Differences in Work-From-Home
 

Source: Kastle Return-to-Work Office Barometer, Google Mobility Trends, PCA, MSREI Strategy, as of October 2021

 
 
 
DISPLAY 11: Demand Expected to be Lower Requiring More Selective Approach
 

Source: PMA, MSREI Strategy, as of August 2021

 
 

Investment Strategies

  • U.S.: Target modern, high-quality office product in high-growth markets benefiting from demographic shifts, e.g., Sun Belt markets.
  • Europe: Reposition office assets meeting demands of modern occupiers that are at attractive basis and defensive rent level.
  • Asia: Target stable, high-yielding assets in core Asian markets where moderate leverage can generate an attractive cash-on-cash yield.
 
 

Hotels

FROM REPRICED ALPHA BET TO GROWTH-ORIENTED BETA PLAY

Operating Fundamentals

  • Leisure hotel fundamentals have recovered far more quickly than we would have anticipated in the U.S. and are now at/ahead of 2019 levels.
  • The recovery has lagged for hotels outside the U.S. and business hotels relying on conferences or international travel.

Investment Strategies

  • Acquire prime hotel assets that may have operating challenges and impaired cash flows that will likely see an accelerated recovery back to pre-COVID RevPAR following the resumption of tourism and business travel.
 
 

Niche Sectors Garnering More Interest

Operating Fundamentals

  • Overall increase in investor interest and allocations to niche sectors.
  • Healthcare continues to perform well. Life science fundamentals remain extremely strong, with vacancy rates near zero in prominent clusters, attracting capital and keeping yields at record-low levels. New development and office-to-lab conversions are increasing supply levels.
  • Student housing offers an attractive yield spread to multifamily, stable and countercyclical demand that has rebounded to 2019 levels in major markets and reduced supply levels versus pre-COVID trends.
  • Senior living fundamentals have rebounded as vaccination rates for the 75+ group accelerates. Supply is also lower compared with pre-COVID levels, and yields are relatively higher than other healthcare sectors, given sector re-pricing.
 
 
 
DISPLAY 12: Life Science Yields Continue to Compress in-line with Strong Rent Growth
 

Source: Costar; Bidwells, MSREI Strategy, as of May 2021

 
 

Investment Strategies

  • Reposition healthcare assets including life science and medical office at attractive yields on cost in markets with an institutional healthcare sector (e.g., U.S., UK)
  • Evaluate opportunities to partner with strong operators to acquire repriced senior housing assets supported by favorable secular demand drivers and lower levels of new supply, (e.g., U.S.).
  • Evaluate opportunities to partner with skilled operators to develop/enhance student housing assets proximate to strong university campuses (e.g., U.S., Europe).
 
 

Retail

RETAIL SECTOR BEGINNING TO RECOVER

Operating Fundamentals

  • Lack of investor interest and challenging fundamentals has increased yield spread over other sectors
  • Leasing activity has been strong in 2H ‘21, despite health concerns, particularly for class A malls
  • More bifurcation in performances as retailers re-orient their locations and footprints to drive more efficiencies
 
 
 
DISPLAY 13: The Decline in Retail Transaction Volume Share Appears to be Bottoming
 

Source: RCA, MSREI Strategy, data as of October 2021

 
 
 
DISPLAY 14: Retail Spread over Industrial Cap Rates Significantly Expanded in U.S., UK
 

Source: Greenstreet, PMA, MSREI Strategy

 
 

Investment Strategies

  • Selectively consider re-priced high street assets at reset rent levels that may benefit from increasing tourism demand
 
 

ESG considerations remain top-of-mind

Investment managers need to remain focused on managing the environmental footprint of real estate assets they acquire and manage to reduce negative environmental impacts while maximizing efficiency and value to investors, tenants and the broader community. Initiatives focused on building safety, existing contamination, energy supply and efficiency, flooding, GHG emissions, indoor environmental air quality, natural hazards, water supply and water efficiency need to be continually monitored and addressed. These ESG considerations are now being fully integrated into investment decisions, underwriting, asset management and hold/sell decisions. Additionally, MSREI believes that there will be opportunities to reposition existing assets to better align to higher ESG standards.

 
 
 
DISPLAY 15: Market Environment Summary
 
 
 

Conclusion

Morgan Stanley Real Estate Investing (MSREI) believes that the global real estate environment will support attractive real estate returns for value-add/ opportunistic investments over the next several years, driven by outsized rental growth in some sectors (e.g., industrial, residential), cap rate compression (supported by low interest rates) and some moderate levels of re-pricing (e.g., in sectors more negatively impacted by COVID). In this investing environment, MSREI believes local market perspective, knowledge, presence and relationships, combined with the ability to actively manage assets to drive NOI growth will be critical to deliver attractive risk-adjusted returns.

 
 
 
Morgan Stanley Real Estate Investing (MSREI) manages global value-add /opportunistic and regional core real estate investment strategies. The team's experience encompasses a broad array of asset classes, geographic regions and investment themes across all phases of the real estate cycle.
 
 
 
 
 

IMPORTANT DISCLAIMERS

The document has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

The information contained herein refers to research, but does not constitute an equity research report and is not from Morgan Stanley Equity Research. Unless otherwise indicated, the views expressed are those of the research and strategy team of Morgan Stanley Real Assets and may differ from those of Morgan Stanley Equity Research and other Morgan Stanley affiliates (including others within Morgan Stanley Real Assets). These views may also differ from investment strategies implemented by Morgan Stanley Real Assets now or in the future. The information (including facts, opinions, estimates or projections) contained herein is based on financial, economic, market and other conditions prevailing as of the date hereof. As such, it remains subject to change at any time. By providing such information, Morgan Stanley Real Assets assumes no obligation to provide any update or supplement to such information following the date hereof. Although reasonable care has been taken to ensure that the information (including facts, opinions, estimates or projections) contained herein is accurate, complete and fair, no warranty, express or implied, is made as to the accuracy, completeness or fairness of such information. Certain economic and market information contained herein may have been obtained from third parties sources. While Morgan Stanley Real Assets believes that such sources are reliable, neither Morgan Stanley Real Assets nor any other Morgan Stanley affiliate has independently verified such information or assumes any responsibility or liability for the accuracy, completeness or fairness of such information or any omission of information.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. There are important differences in how the strategy is carried out in each of the investment vehicles. Your financial professional will be happy to discuss with you the vehicle most appropriate for you given your investment objectives, risk tolerance and investment time horizon.

The information contained herein is highly confidential. By accepting this document, you agree that this document (including any data, analysis, conclusions or other information contained herein and all oral information, if any, provided by Morgan Stanley Real Assets in connection herewith) may not be photocopied, reproduced or otherwise shared or distributed to any other persons, in whole or in part, without the prior consent of Morgan Stanley Real Assets. Notwithstanding the foregoing, this document and information may be provided to (a) your legal, tax, financial and other advisors who agree to maintain this document in confidence and (b) a government official to the extent necessary to comply with a judicial or governmental order.

Except as otherwise indicated herein, the views and opinions expressed herein are those of Morgan Stanley Real Assets, are based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date hereof.

Historical information is not indicative of future results, and the historical information in this Presentation should not be viewed as an indicator of any future performance that may be achieved as a result of implementing an investment strategy substantially identical or similar to that described in this Presentation

Certain information contained in this Presentation constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors should pay close attention to the assumptions underlying the analyses and forecasts contained in this Presentation. The analyses and forecasts contained in this Presentation are based on assumptions believed to be reasonable in light of the information presently available. Such assumptions (and the resulting analyses and forecasts) may require modification as additional information becomes available and as economic and market developments warrant. Any such modification could be either favorable or adverse. Nothing contained in this Presentation may be relied upon as a guarantee, promise, assurance or a representation as to the future.

Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

Real estate investments are subject to special risks, including interest rate and property value fluctuations, as well as risks related to general and economic conditions.

Morgan Stanley, its affiliates and Morgan Stanley Financial Advisors do not provide tax, accounting or legal advice. Individuals should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving legal matters.

Morgan Stanley is not responsible for the information contained on any third party website or your use or inability to use such site, nor do we guarantee its accuracy or completeness. The terms, conditions, and privacy policy on any third party website may be different from those applicable to your use of any Morgan Stanley website. The opinions expressed by the author of an article written by a third party are solely his/her own and do not necessarily reflect those of Morgan Stanley. The information and data provided by any third party website of publication is as of the date of the material when it was written and is subject to change without notice.

DISTRIBUTION

This communication is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each other’s products and services. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. MSIM’s affiliates are: Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd, Calvert Research and Management, Eaton Vance Management, Parametric Portfolio Associates LLC, Atlanta Capital Management LLC, Eaton Vance Management International (Asia) Pte. Ltd.

This material has been issued by any one or more of the following entities:

EMEA:

This material is for Professional Clients/Accredited Investors only.

In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (“FMIL”). FMIL is regulated by the Central Bank of Ireland and is incorporated in Ireland as a private company limited by shares with company registration number 616661 and has its registered address at The Observatory, 7-11 Sir John Rogerson’s Quay, Dublin 2, D02 VC42, Ireland.

Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorized and regulated by the Financial Conduct Authority. Registered in England. Registered No. 1981121. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA.

In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorized and regulated by the Eidgenössische Finanzmarktaufsicht (“FINMA”). Registered Office: Beethovenstrasse 33, 8002 Zurich, Switzerland.

Outside the US and EU, Eaton Vance materials are issued by Eaton Vance Management (International) Limited (“EVMI”) 125 Old Broad Street, London, EC2N 1AR, UK, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority.

Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain.

Hong Kong: This material has been issued by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to “professional investors” as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571). The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Accordingly, save where an exemption is available under the relevant law, this material shall not be issued, circulated, distributed, directed at, or made available to, the public in Hong Kong. Singapore: This material should not be considered to be the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under section 304 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”); (ii) to a “relevant person” (which includes an accredited investor) pursuant to section 305 of the SFA, and such distribution is in accordance with the conditions specified in section 305 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. This publication has not been reviewed by the Monetary Authority of Singapore. Eaton Vance Management International (Asia) Pte. Ltd. (“EVMIA”) holds a Capital Markets Licence under the Securities and Futures Act of Singapore (“SFA”) to conduct, among others, fund management, is an exempt Financial Adviser pursuant to the Financial Adviser Act Section 23(1)(d) and is regulated by the Monetary Authority of Singapore (“MAS”). Eaton Vance Management, Eaton Vance Management (International) Limited and Parametric Portfolio Associates® LLC holds an exemption under Paragraph 9, 3rd Schedule to the SFA in Singapore to conduct fund management activities under an arrangement with EVMIA and subject to certain conditions. None of the other Eaton Vance group entities or affiliates holds any licences, approvals or authorisations in Singapore to conduct any regulated or licensable activities and nothing in this material shall constitute or be construed as these entities or affiliates holding themselves out to be licensed, approved, authorised or regulated in Singapore, or offering or marketing their services or products. Australia: This publication is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 314182, which accept responsibility for its contents. This publication, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act. EVMI is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of the provision of financial services to wholesale clients as defined in the Corporations Act 2001 (Cth) and as per the ASIC Corporations (Repeal and Transitional) Instrument 2016/396. Calvert Research and Management, ARBN 635 157 434 is regulated by the U.S. Securities and Exchange Commission under U.S. laws which differ from Australian laws. Calvert Research and Management is exempt from the requirement to hold an Australian financial services license in accordance with class order 03/1100 in respect of the provision of financial services to wholesale clients in Australia.

China & South Korea: This material does not constitute an offer to sell or the solicitation of an offer to buy any services referred to expressly or impliedly in the material in the People’s Republic of China (excluding Hong Kong, Macau and Taiwan, the “PRC”) to any person to whom it is unlawful to make the offer or solicitation in the PRC. The material may not be provided, sold, distributed or delivered, or provided or sold or distributed or delivered to any person for forwarding or resale or redelivery, in any such case directly or indirectly, in the People’s Republic of China (the PRC, excluding Hong Kong, Macau and Taiwan) in contravention of any applicable laws.

In addition, this material has been prepared for information purposes only and should not be construed as legal, tax or investment advice nor as an offer or solicitation to buy or sell any securities, any interest in securities or any other instrument. This document does not constitute a public offer of investment, whether by sale or subscription, in the People’s Republic of China (PRC). Persons who come into possession of this document are required to observe this restriction and obtain any applicable regulatory approvals prior to making any investment decisions.

EVMI is registered as a Discretionary Investment Manager in South Korea pursuant to Article 18 of Financial Investment Services and Capital Markets Act of South Korea.

Japan: For professional investors, this material is circulated or distributed for informational purposes only. For those who are not professional investors, this material is provided this material is provided in relation to Morgan Stanley Investment Management (Japan) Co., Ltd. (“MSIMJ”)’s business with respect to discretionary investment management agreements (“IMA”) and investment advisory agreements (“IAA”). This is not for the purpose of a recommendation or solicitation of transactions or offers any particular financial instruments. Under an IMA, with respect to management of assets of a client, the client prescribes basic management policies in advance and commissions MSIMJ to make all investment decisions based on an analysis of the value, etc. of the securities, and MSIMJ accepts such commission. The client shall delegate to MSIMJ the authorities necessary for making investment. MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. All investment profits and losses belong to the clients; principal is not guaranteed. Please consider the investment objectives and nature of risks before investing. As an investment advisory fee for an IAA or an IMA, the amount of assets subject to the contract multiplied by a certain rate (the upper limit is 2.20% per annum (including tax)) shall be incurred in proportion to the contract period. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. in advance. All clients should read the Documents Provided Prior to the Conclusion of a Contract carefully before executing an agreement. This material is disseminated in Japan by MSIMJ, Registered No. 410 (Director of Kanto Local Finance Bureau (Financial Instruments Firms)), Membership: the Japan Securities Dealers Association, The Investment Trusts Association, Japan, the Japan Investment Advisers Association and the Type II Financial Instruments Firms Association.

Australia: This publication is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 314182, which accept responsibility for its contents. This publication, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act.

MIDDLE EAST:

Dubai: MSIM Ltd (Representative Office, Unit Precinct 3-7th Floor-Unit 701 and 702, Level 7, Gate Precinct Building 3, Dubai International Financial Centre, Dubai, 506501, United Arab Emirates. Telephone: +97 (0)14 709 7158).

EVMI utilizes a third-party organization in the Middle East, Wise Capital (Middle East) Limited (“Wise Capital”), to promote the investment capabilities of Eaton Vance to institutional investors. For these services, Wise Capital is paid a fee based upon the assets that Eaton Vance provides investment advice to following these introductions.

Saudi Arabia. This document is not and does not purport to be any of the following: (a) a marketing communication, (b) a securities advertisement, (c) a financial promotion. Material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, recipients or viewers of this document should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision. This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Rules of Offering Securities and Continuing Obligations and the Securities Business Regulations issued by the Capital Market Authority. The disclosure of this presentation is restricted to sophisticated investors.

U.S.: A separately managed account may not be appropriate for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment managers, please refer to Form ADV Part 2.

Please consider the investment objectives, risks, charges and expenses of the funds carefully before investing. The prospectuses contain this and other information about the funds. To obtain a prospectus for the Morgan Stanley funds please download one at morganstanley.com/im or call 1-800-548-7786 for the Eaton Vance and Calvert Funds please download one at https://funds. eatonvance.com/open-end-mutual-fund-documents.php or contact your financial professional. Please read the prospectus carefully before investing.

Morgan Stanley Distribution, Inc. serves as the distributor for Morgan Stanley Funds.

Eaton Vance Distributors, Inc. (“EVD”), serves as the distributor for Eaton Vance and Calvert Funds.

NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT A DEPOSIT

The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers should conduct their own due diligence on the accuracy of the information in this presentation. If you do not understand the contents of this document you should consult an authorized financial adviser.

AS A DIVERSIFIED GLOBAL FINANCIAL SERVICES FIRM, MORGAN STANLEY ENGAGES IN A BROAD SPECTRUM OF ACTIVITIES INCLUDING FINANCIAL ADVISORY SERVICES, INVESTMENT MANAGEMENT ACTIVITIES, LENDING, COMMERCIAL BANKING, SPONSORING AND MANAGING PRIVATE INVESTMENT FUNDS, ENGAGING IN BROKER-DEALER TRANSACTIONS AND PRINCIPAL SECURITIES, COMMODITIES AND FOREIGN EXCHANGE TRANSACTIONS, RESEARCH PUBLICATION AND OTHER ACTIVITIES. IN THE ORDINARY COURSE OF ITS BUSINESS, MORGAN STANLEY PERFORMS FULL-SERVICE INVESTMENT BANKING AND FINANCIAL SERVICES AND THEREFORE ENGAGES IN ACTIVITIES WHERE MORGAN STANLEY’S INTERESTS OR THE INTERESTS OF ITS CLIENTS MAY CONFLICT WITH THE INTERESTS OF THE INVESTORS. ALL INFORMATION CONTAINED HEREIN IS PROPRIETARY AND IS PROTECTED UNDER COPYRIGHT LAW.

 

This is a Marketing Communication.

Morgan Stanley Investment Management (Australia) Pty Limited operates under AFSL No: 314182.

Not to be shown, quoted or distributed to the public. The information shown in this website is not personal advice and does not take into account the investment objectives, financial situation or needs of any person.

Information on this website should not be considered a solicitation to buy, an offer to sell or a recommendation for any security in any jurisdiction where such an offer, solicitation or recommendation would be unlawful or unauthorized. In addition, investments may not be made via this website.

Past performance of any product described on this site is not a reliable indication of future performance.


Privacy & Cookies    •    Terms of Use

©  Morgan Stanley | Investment Management (Australia) Pty Limited ACN 122040037